Detailed Financial Plan for Alastair and Wendy Windsor's Future

This financial plan addresses the retirement and investment needs of Alastair and Wendy Windsor, a couple nearing retirement. The report analyzes their current financial situation, including income, pensions from various sources, and existing assets. It explores suitable pension schemes, considering the 2014/15 pension reforms, and evaluates the tax implications of lump-sum payments and inheritance. The plan outlines investment options, such as government bonds and mutual funds, aligning with the couple's risk tolerance and financial objectives. Additionally, it provides mortgage advice to their son, Harry, and emphasizes the importance of will creation for estate planning. The report includes detailed calculations, assumptions, and references to support its recommendations, aiming to secure a stable financial future for Alastair and Wendy.

Financial plan
FINANCIAL PLAN OF ALASTAIR AND WENDY WINDSOR

Scope
 Understanding the case in its entirety.
 Requirements of Alastair and Wendy.
 Financial objectives of Alastair and Wendy in the short and long run.
 Pension schemes suitable to the couple (Ellison, 2011).
 Tax matters affecting the financial plan of the couple.

Personal details and goals
 Alastair and Wendy aged 56 years and 49 years respectively are elderly
couple looking to secure their future.
 Finding stable sources to secure their future is the primary objective of
the financial plan.
 Both are employed and approaching the age of retirements.
 Alastair earns £26,500 per annum whereas Wendy earns £49,000 per
annum (Farrar, Moizer & Hyde, 2012).

Scope
 Pension reforms introduced in 2014/15.
 Effects of these reforms on income of the couple.
 Planning of estate.
 Selecting appropriate investment options.
 Suggestion to Harry for mortgage.

Assumptions
 Alastair wants to retire at an early age and if possible even now.
 The company in which Alastair works however pays pension at the age
of 60 years.
 It has been assumed that salaries of Alastair and Wendy have increased
(Hinz, 2011).
 New reforms of pension schemes have been availed by the couple.

Alastair’s pension
Pensions Amount (£)
Lump sum due (52410 + 15480) 67890.00
Annual income from pension (17470 + 5160) 22630.00
Total pension income 90520.00

Alastair’s pension
 The defined benefit scheme is for 19 years.
 Pension benefits shall be paid starting from 2022.
 Annual pension amount is £17,470.
 Again three lump sum payments can be received in addition to the
above annual pension, i.e. (17470 x 3) = £52,410.
 Transfer value of pension is £450,000.

Alastair’s pension
 Salary received from NHS is £26,500 per annum.
 Annual pension from NHS £5160.
 Three lump sum payment is (5160x 3) = £15480.
 Cover for life insurance is £49,500.
 The insurance cover shall be received by Wendy (FRASSI, GNECCO,
PAMMOLLI & WEN, 2018).

Wendy’s pension
Wendy has taught 8 years in private sector and 8 years Further Education
with 4 years from Higher Education. Contribution to pension fund was
10.2% of £ 49000, i.e. £ 4998. In addition entitled pension of £ 4500 and £
11700 as lump sum (Kira & Eijnatten, 2011).

Wendy’s pension
 10.2% of her annual salary (49000 x 10.2%) = £4998
 £4500 as entitled pension along with lump sum payment of £11700.
 Total pension to be received by Wendy at the age of 65 is calculated
below:
 (4568+2000) = £6568.

Key assumptions for Wendy’s
pension
 Wendy also wants to retire at an early age and if possible even now.
 It has been assumed that salary of Wendy has increased.
 New reforms of pension schemes have been availed by the couple.

Tax effects
 The lump sum payment of payment is taxable ta the rate of 40%.
 With taxation pension income is 20%.

Employment income projections
0
20,000
40,000
60,000
80,000
100,000
Employment Income Projection Scenario's
15-16; L 56 D 49 16-17; L 57 D 50
17-18; L 58 D 51 18-19; L 59 D 52
19-20; L 60 D 53 20-21; L 61 D 54
21-22; L 62 D 55 22-23; L 63 D 56
23-24; L 64 D 57 24-25; L 65 D 58
25-26; L 66 D 59 26-27; L 67 D 60
27-28; L 68 D 61 28-29; L 69 D 62
29-30; L 70 D 63 30-31; L 71 D 64
31-32; L 72 D 65 32-33; L 73 D 66
33-34; L 74 D 67 34-35; L 75 D 68
35-36; L 76 D 69 36-37; L 77 D 70
Age
G B P

Pension reforms 2014/15
 Reforms introduced in pension related provisions in the UK during the
fiscal year 2014/15 shall be used by the couple to take advantage of
the reforms.
 Reduced rate of tax on lump sum payment shall be availed as per the
pension reform.
 Applicable taxes on pension income on lump sum dues have reduced
for all types of pensioners (Lomax, 2012).

Tax effects on income and gains
Particulars Amount (£) Amount (£)
Sale price 190000
Less: Purchase
consideration
69000
Capital gain 121000
Capital gain tax @28% 33880
Net amount received (190000 – 33880) 156120

Inheritance tax
 Inheritance tax @40% on £ 14000 is £ 5600 on the property inherited.
 Inheritance tax on furniture inherited by Wendy from her grandmother
(£ 15000 x 40%) = £6000

Income and savings projections.
15-16; L 56 D 49
16-17; L 57 D 50
17-18; L 58 D 51
18-19; L 59 D 52
19-20; L 60 D 53
20-21; L 61 D 54
21-22; L 62 D 55
22-23; L 63 D 56
23-24; L 64 D 57
24-25; L 65 D 58
25-26; L 66 D 59
26-27; L 67 D 60
27-28; L 68 D 61
28-29; L 69 D 62
29-30; L 70 D 63
30-31; L 71 D 64
31-32; L 72 D 65
32-33; L 73 D 66
33-34; L 74 D 67
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
Income & Net Savings Projections
Alastair Pension Income
Alastair Employment Income
Wendy Employment Income
Wendy Pension Income
Net Annual Savings
Age
GBP

Investment portfolio
 It is important to keep in mind the requirements and objectives of the
couple while selecting appropriate investment portfolio.
 Couple are not completely risk averse.
 However, it is absolutely important to ensure that the risk of losing
money is almost nil, if it is possible.

Investment options
 Investment in Government bonds, investment in mutual funds are two
of the most suitable investment options considering the requirements
and objectives of the couple (Marotta, 2011).
 Treasury bills and treasury bonds are also safe and secure option for
investment.

Value of investment
15-16; L 56 D 49
16-17; L 57 D 50
17-18; L 58 D 51
18-19; L 59 D 52
19-20; L 60 D 53
20-21; L 61 D 54
21-22; L 62 D 55
22-23; L 63 D 56
23-24; L 64 D 57
24-25; L 65 D 58
25-26; L 66 D 59
26-27; L 67 D 60
27-28; L 68 D 61
28-29; L 69 D 62
29-30; L 70 D 63
30-31; L 71 D 64
31-32; L 72 D 65
32-33; L 73 D 66
33-34; L 74 D 67
34-35; L 75 D 68
35-36; L 76 D 69
36-37; L 77 D 70
0
400,000
800,000
1,200,000
1,600,000
Value Of Investments
Age
GBP

Mortgage advice to Harry
 Harry is the son of Alastair.
 Harry is looking to acquire a house property.
 He has savings of £6,000.
 Annual salary of Harry stands at £24,000.
 A maximum of £667 can be used monthly for property acquisition
scheme.

House mortgage calculation
Particulars Amount (£)
Estimated value of the property 90000.00
Expected deposit @20% 18000.00
Estimated mortgage loan rate over
20 years duration
4%
Total Interest (90000 – 18000) x 4%
x 25
57600.00
Total due (72000 + 57600) 129600.00
Number of months 240.00
Per month EMI 540.00

Will creation
 Alastair and Wendy shall prepare a will to ensure that their properties
are correctly vested with their children.
 Wealth of the couple shall be equally distributed between Harry and
Holly as per the will.
 Smooth inheritance without any legal complexity will be possible as a
result of the will.

Refrences
 Ellison, R. (2011). The role of the state in pensions. Pensions: An International Journal, 16(2), 67-68. doi:
10.1057/pm.2011.8
 Farrar, S., Moizer, J., & Hyde, M. (2012). The value of incentives to defer the UK state pension. Pensions: An
International Journal, 17(1), 46-62. doi: 10.1057/pm.2012.2
 FRASSI, B., GNECCO, G., PAMMOLLI, F., & WEN, X. (2018). Intragenerational redistribution in a funded pension
system. Journal Of Pension Economics And Finance, 18(2), 271-303. doi: 10.1017/s147474721700049x
 Hinz, R. (2011). The World Bank’s Pension Policy Framework and the Dutch Pension System: A Paradigm for the
Multi-Pillar Design?. SSRN Electronic Journal, 2(3), 13-18. doi: 10.2139/ssrn.1865754
 JORDAN Publishing. (2011). INTERNATIONAL SURVEY OF FAMILY LAW (4th ed., pp. 13-37). LONDON.
 Kira, M., & Eijnatten, F. (2011). Socially Sustainable Work Organizations: Conceptual Contributions and
Worldviews. Systems Research And Behavioral Science, 28(4), 418-421. doi: 10.1002/sres.1083
 Lomax, A. (2012). An inconvenient truth: Pensions in the UK have priority ranking. Pensions: An International
Journal, 17(1), 4-7. doi: 10.1057/pm.2012.1
 Marotta, G. (2011). Are Defined Contribution Pension Schemes Socially Sustainable? A Conceptual Map from a
Macroprudential Perspective. SSRN Electronic Journal, 2(3), 147. doi: 10.2139/ssrn.1941269